BOJ Tankan survey shows softer sentiment

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Source: Market Watch Personal Finance

TOKYO–Confidence among Japan’s large manufacturers weakened for the first time in two years in the January-March quarter as they grew cautious about their business outlook amid the yen’s appreciation, stock falls and the latest U.S. trade measures, a central bank survey showed Monday.

The main index measuring large manufacturers’ sentiment was at plus 24 in the three month period, compared with plus 25 in the previous survey in December, according to the Bank of Japan’s quarterly tankan survey.

The reading compares with a forecast of plus 25 by economists polled by The Wall Street Journal. The index represents the percentage of companies saying business conditions are favorable minus those saying conditions are unfavorable.

The tankan result comes at the end of a quarter in which the yen gained 6% against the dollar, Japanese stocks fell 5.8% and the U.S. slapped tariffs on steel and aluminium without giving Tokyo an exemption offered to other close allies.

The outcome suggests that while Japan’s biggest firms remain optimistic about the future, some caution has emerged.

The tankan index for large non-manufacturers came to plus 23 in the March survey, matching the result of the previous quarter. The reading matched was lower than a forecast by economists for plus 24.

The survey also showed that big manufacturers see profits falling 3.2% in the year ending March 2019. That’s based on an assumption that the dollar will trade at an average of 109.66 yen this business year, an assumption that itself looks optimistic. The dollar was at Y106.31 in early Asian hours Monday.

Large companies plan to increase their capital investment in the current fiscal year by 2.3%. The figure could be revised higher in the following quarters because Japanese firms tend to take a cautious stance on investment plans at the start of the year.

The BOJ made a regular revision to its sample companies, effective from the March data. After the revision, the December big manufacturers diffusion index came to 26.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com.

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Source: Market Watch Personal Finance